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TOTAL FAILURE CONSIDERATION – FEDERAL COURT OVERRULES BERJAYA TIMES SQUARE: TOTAL FAILURE OF CONSIDERATION REDEFINED

1. Summary and Facts:
In Lim Swee Choo & Anor v Ong Koh Hou @ Won Kok Fong and another appeal [2025] 6 MLJ 327, Lim Swee Choo and Chiam Eng Huat (“Appellants”) bought land from DA Land and later assigned their rights to Ong Koh Hou (“Respondent”) for RM25.5 million, partly through debt set-off and partly by cash and investment. Unbeknownst to the Appellants, the Respondent made a backdated SPA with DA Land for the same lands but defaulted on payment. The Shah Alam High Court found the deal illegal as the Respondent was an unlicensed moneylender and allowed DA Land to forfeit the RM23 million deposit. The Respondent then sought restitution from the Appellants for total failure of consideration.
The High Court dismissed the claim, the Court of Appeal allowed it, and the Appellants appealed to the Federal Court.

2. Legal Issues:
• Whether the Respondent had a right to recover the money paid to the Appellants based on the doctrine of total failure of consideration.
• Whether the respondent, found to be an unlicensed moneylender, could rely on equitable restitution to recover the RM23 million.

3. Court’s Findings:
• The appeal was allowed by the Federal Court.
• It was held that no total failure consideration by the Appellant as they already performed their part by assigning their rights and interest in the land to the Respondent.
• The Respondent already benefited from that assignment where the loss resulted from his own unlawful dealings with DA land and not from any breach by the Appellants.
• The respondents were barred from the restitution claim on the grounds of illegality, since the money from an illegal moneylending transaction.
• Berjaya Times Square Sdn Bhd v M-Concept Sdn Bhd [2009] 3 MLRA 1 is no longer a good law to be referred, as it had wrongly merged the concepts of contract termination for breach and restitution for total failure of consideration.
• The doctrine of total failure of consideration applies only to restitutionary relief after a contract ceases to be operative, not to determine whether a party may terminate a contract under section 40 of the Contracts Act 1950.

4. Practical Implications:
This judgment affirms the several principle of laws including;
• The doctrine of total failure consideration applied only when no part of a contract has been performed.
• Parties involved in an illegal transaction cannot rely on equity or restitution to recover their losses.
• Parties cannot recover money paid under a contract if they have already received some benefit.

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